Top 5 Mistakes Wellington First Home Buyers Make with the Kāinga Ora First Home Loan

A quick heads-up before we dive in: This article is strictly for general informational purposes and does not constitute financial, legal, or tax advice. Every situation is entirely unique, and bank lending policies change frequently. Before making any decisions about your property journey, it is highly recommended that you seek independent advice from a qualified financial adviser.

Trying to piece together a deposit for your first home can be incredibly stressful, especially in the Wellington market. If you don't have a massive chunk of cash saved up, the Kāinga Ora First Home Loan can be a fantastic tool that can get you into a house with just a 5% deposit.

But because the rules change frequently, there is a lot of outdated advice out there. At Home Loan Factory, we regularly see buyers who have hit a brick wall simply because they didn't know the specific quirks of a 5% deposit application.

If you are thinking about buying soon, here are the top five mistakes we see—and how to avoid them.

1. Confusing the loan with the old grant

I see this one all the time. A lot of buyers come in hoping to use the First Home Grant to boost their deposit, but the government actually closed that scheme back in May 2024. The First Home Loan, however, is still going strong. Just keep in mind that it’s not free cash; instead, it's a program where Kāinga Ora essentially backs your mortgage, making the bank comfortable enough to lend to you with a smaller deposit.

There was also the short-lived Kainga Ora First Home Partner Scheme, again, the First Home Loan is not this and is alive and kicking! (as of time of writing).

2. Changing jobs right before applying

Getting a better-paying job is awesome, but doing it right before you apply for a Kainga Ora First Home Loan can throw a spanner in the works.

Under the rules of the scheme, you need at least 1 year with your current workplace, or 2 years in a similar role in the same industry - for employees at least, other terms apply for casual or self employed. If you had over a year in your last role, or your new job is completely different, that can start the timer again.

Now this is perfectly fine if you’re aware of the changes, but you don’t want it to be a surprise if you were planning on buying your new home shortly after the job change.

3. Accidentally tipping over the income caps

To be eligible for the First Home Loan, your income needs to be $95,000 or less for a single buyer without dependants, or $150,000 or less for a couple or a single buyer with dependants.

But here's the catch: it’s based on your gross income over the previous 12 months. I’ve seen buyers put off getting advice, pick up some extra overtime shifts to build up deposit and savings, and accidentally bump their 12-month earnings just over the line. If you think you might be close to the cap, get in touch early so we can accurately map out your timeline.

On the flip side, I’ve also seen people think they don’t qualify because they currently earn over $150,000 going forward, but had time off work for part of the year, were studying, or have only recently received that level of income. They may still qualify!

4. Assuming Kāinga Ora lends you the money

A common misunderstanding is that your mortgage will be directly with the government. In reality, you still apply for the mortgage through a standard mainstream bank—like Westpac, Kiwibank, ASB, or Co-operative Bank. Kāinga Ora just acts as a silent guarantor in the background.

Because a 5% deposit means borrowing 95% of the property’s value, you still have to comfortably pass the bank's standard affordability checks to prove you can handle the repayments.

5. Panicking over a messy building report

Wellington has some beautiful 1920s character homes, but they almost always come with maintenance items on the building report. Kainga Ora can be quite particular about the condition of a property, and repairs are generally capped at no more than $10,000 worth of work.

An unexpected issue can feel like a dealbreaker, but this is exactly where having an experienced mortgage adviser on your team pays off. We deal with these reports every day and know how to work with your builder, your solicitor and Kainga Ora to make sure you don’t miss out on the right house with just a few blemishes.

Of course, if the property is not in a good condition and the issues too great, we will be up front with you on that too.

The Bottom Line

Getting a 5% deposit home loan across the line isn't quite as simple as walking into a branch, but it is absolutely doable with the right strategy and a bit of care. You don't have to figure it all out on your own—that is exactly what we are here for.

If you're looking to buy your first home and want to see if the First Home Loan could work for you, reach out to the team at Home Loan Factory. Let's look at your numbers, figure out where you stand, and get a solid plan in place.